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America's big international banks may have to restructure and downsize their operations now, unless they can prove they will be easy to dismantle in another financial crisis, said U.S. regulator Sheila Bair.
Multinationals will need to set up more foreign subsidiaries and realign their legal structures to make it easier for regulators to liquidate them if necessary, Bair told the Reuters Future Face of Finance Summit.
Quote:
Bair's words are a warning shot for the biggest U.S. banks, including Citigroup, Bank of America, JPMorgan Chase, which are expected to submit their so-called "living wills" to regulators by the end of the year.
The United States is more advanced in the "living will" process than other G20 countries, which have agreed in principle to an orderly liquidation process for big firms.
The aim of the living wills is to give regulators a credible blueprint to dismantle a financial firm whose collapse could significantly harm markets.
Quote:
Bair said traditional deposit-taking banks in the United States probably can produce plans for a shutdown, but large multinationals with complex legal structures need to simplify.
"The burden is on them initially to show us that they don't think they need subsidiarization," she said. "They need to give us a plan on how they can be resolved on an international basis without it."
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"If you set up a business in a way to optimize ease of liquidation, that may not be the way to optimize running a successful business," said John Douglas, now a Davis Polk attorney.
Others said the changes may be more hassle than expensive, and the changes would be legalistic. "This is just the latest in 'Can you jump through this hoop backwards?'," said Paul Miller, an analyst with FBR Capital Markets.
Hmmmm...At the end of the day I don't think Bair's idea is going to get that far and even if it does get some traction any action probably will be weak and ineffectual at best.
The banks run this country. Whatever they have to do will be for the benefit of their top executives. It will sound good in the press with lots of catchy sound bites but will be weak or entirely meaningless in practice. I am sure the taxpayers will somehow pay the banks to come up with these "living wills".
The banks run this country. Whatever they have to do will be for the benefit of their top executives. It will sound good in the press with lots of catchy sound bites but will be weak or entirely meaningless in practice. I am sure the taxpayers will somehow pay the banks to come up with these "living wills".
The big banks should be broken up immediately.
A+
This is either a mis-direction/farce, or look to see Shelia Bair in the unemployment line rather soon.
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